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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-22796 June 26, 1967

DELFIN NARIO, and ALEJANDRA SANTOS-NARIO,
plaintiffs-appellants,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY,
defendant-appellee.
Ricardo T. Bancod and Severino C. Zarasate for plaintiffs-
appellants.
M. Lim, M. Y. Macias and Associates for defendant-appellee.
REYES, J.B.L., J.:

Direct appeal, on pure question of law, from a decision of

the Court of First Instance of Manila, in its Civil Case No.
54942, dismissing plaintiffs' complaint as well as from a
later order of the same court, denying a motion to set aside
and/or reconsider said decision of dismissal.

The facts of this case may be stated briefly as follows:

Mrs. Alejandra Santos-Mario was, upon application, issued,

on June 12, 1959, by the Philippine American Life Insurance
Co., a life insurance policy (No. 503617) under a 20-year
endowment plan, with a face value of P5,000.00. She
designated thereon her husband, Delfin Nario, and their
unemancipated minor son, Ernesto Nario, as her irrevocable
beneficiaries.

About the middle of June, 1963, Mrs. Nario applied for a

loan on the above stated policy with the Insurance
Company, which loan she, as policy-holder, has been
entitled to avail of under one of the provisions of said policy
after the same has been in force for three (3) years, for the
purpose of using the proceeds thereof for the school
expenses of her minor son, Ernesto Nario. Said application
bore the written signature and consent of Delfin Nario in
two capacities: first, as one of the irrevocable beneficiaries
of the policy; and the other, as the father-guardian of said
minor son and irrevocable beneficiary, Ernesto Nario, and
as the legal administrator of the minor's properties,
pursuant to Article 320 of the Civil Code of the Philippines.

The Insurance Company denied said application,

manifesting to the policy holder that the written consent for
the minor son must not only be given by his father as legal
guardian but it must also be authorized by the court in a
competent guardianship proceeding.

After the denial of said policy loan application, Mrs. Nario

signified her decision to surrender her policy to the
Insurance Company, which she was also entitled to avail of
under one of the provisions of the same policy, and
demanded its cash value which then amounted to P520.00.

The Insurance Company also denied the surrender of the

policy, on the same ground as that given in disapproving
the policy loan application; hence, on September 10, 1963,
Mrs. Alejandra Santos-Nario and her husband, Delfin Nario,
brought suit against the Philippine American Life Insurance
Co. in the above mentioned court of first instance, seeking
to compel the latter (defendant) to grant their policy loan
application and/or to accept the surrender of said policy in
exchange for its cash value. 1wph1.t

Defendant Insurance Company answered the complaint,

virtually admitting its material allegations, but it set up the
affirmative defense that inasmuch as the policy loan
application and the surrender of the policy involved acts of
disposition and alienation of the property rights of the
minor, said acts are not within the powers of the legal
administrator, under article 320 in relation to article 326 of
the Civil Code; hence, mere written consent given by the
father-guardian, for and in behalf of the minor son, without
any court authority therefor, was not a sufficient
compliance of the law, and it (defendant Insurance
Company) was, therefore, justified in refusing to grant and
in disapproving the proposed transactions in question.

There having been no substantial disagreement or dispute

as to any material fact, the parties, upon joint motion which
the lower court granted, dispensed with the presentation of
evidence and submitted their respective memoranda, after
which the case was considered submitted for decision.

The lower court found and opined that since the parties
expressly stipulated in the endorsement attached to the
policy and which formed part thereof that

It is hereby understood and agreed that,

notwithstanding the provisions of this Policy to the
contrary, inasmuch as the designation of the
beneficiaries have been made by the Insured without
reserving the right to change said beneficiaries, the
Insured may not designate a new beneficiary or assign,
release or surrender this Policy to the Company and
exercise any and all other rights and privileges
hereunder or agree with the Company to any change in
or amendment to this Policy, without the consent of the
beneficiaries originally designated;
that under the above quoted provision, the minor son, as
one of the designated irrevocable beneficiaries, "acquired a
vested right to all benefits accruing to the policy, including
that of obtaining a policy loan to the extent stated in the
schedule of values attached to the policy (Gercio vs. Sun
Life Assurance of Canada, 48 Phil. 53, 58)"; that the
proposed transactions in question (policy loan and
surrender of policy) involved acts of disposition or
alienation of the minor's properties for which the consent
given by the father-guardian for and in behalf of the minor
son, must be with the requisite court authority (U.S.V.A. vs.
Bustos, 92 Phil. 327; Visaya vs. Suguitan, G.R. No. L-8300,
November 18, 1955; 99 Phil. 1004 [unrep] and in the case at
bar, such consent was given by the father-guardian without
any judicial authority; said court, agreeing with defendant's
contention, sustained defendant's affirmative defense, and
rendered, on January 28, 1964, its decision dismissing
plaintiffs' complaint.

Unable to secure reconsideration of the trial Court's ruling,

petitioner appealed directly to this Court, contending that
the minor's interest amounted to only one-half of the
policy's cash surrender value of P520.00; that under Rule
96, Section 2 of the Revised Rules of Court, payment of the
ward's debts is within the powers of the guardian, where no
realty is involved; hence, there is no reason why the father
may not validly agree to the proposed transaction on behalf
of the minor without need of court authority.

The appeal is unmeritorious. We agree with the lower court

that the vested interest or right of the beneficiaries in the
policy should be measured on its full face value and not on
its cash surrender value, for in case of death of the insured,
said beneficiaries are paid on the basis of its face value
and in case the insured should discontinue paying
premiums, the beneficiaries may continue paying it and are
entitled to automatic extended term or paid-up insurance
options, etc. and that said vested right under the policy
cannot be divisible at any given time. We likewise agree
with the conclusion of the lower court that the proposed
transactions in question (policy loan and surrender of
policy) constitute acts of disposition or alienation of
property rights and not merely of management or
administration because they involve the incurring or
termination of contractual obligations.

As above noted, the full face value of the policy is

P5,000.00 and the minor's vested interest therein, as one of
the two (2) irrevocable beneficiaries, consists of one-half
() of said amount or P2,500.00.

Article 320 of the Civil Code of the Philippines provides

The father, or in his absence the mother, is the legal

administrator of the property pertaining to the child
under parental authority. If the property is worth more
than two thousand pesos, the father or mother shall give
a bond subject to the approval of the Court of First
Instance.

and article 326 of the same Code reads

When the property of the child is worth more than two

thousand pesos, the father or mother shall be
considered a guardian of the child's property, subject to
the duties and obligations of guardians under the Rules
of Court.

The above quoted provisions of the Civil Code have already

been implemented and clarified in our Revised Rules of
Court which provides

SEC. 7. Parents as guardians. When the property of the

 child under parental authority is worth two thousand
pesos or less, the father or the mother, without the
necessity of court appointment, shall be his legal
guardian. When the property of the child is worth more
than two thousand pesos, the father or the mother shall
be considered guardian of the child's property, with the
duties and obligations of guardians under these rules,
and shall file the petition required by Section 2 hereof.
For good reasons the court may, however, appoint
another suitable person. (Rule 93).

It appearing that the minor beneficiary's vested interest or

right on the policy exceeds two thousand pesos
(P2,000.00); that plaintiffs did not file any guardianship
bond to be approved by the court; and as later implemented
in the abovequoted Section 7, Rule 93 of the Revised Rules
of Court, plaintiffs should have, but, had not, filed a formal
application or petition for guardianship, plaintiffs-parents
cannot possibly exercise the powers vested on them, as
legal administrators of their child's property, under articles
320 and 326 of the Civil Code. As there was no such
petition and bond, the consent given by the father-guardian,
for and in behalf of the minor son, without prior court
authorization, to the policy loan application and the
surrender of said policy, was insufficient and ineffective,
and defendant-appellee was justified in disapproving the
proposed transactions in question.

The American cases cited by appellants are not applicable

to the case at bar for lack of analogy. In those cases, there
were pending guardianship proceedings and the guardians
therein were covered by bonds to protect the wards'
interests, which circumstances are wanting in this case.

The result would be the same even if we regarded the

interest of the ward to be worth less than P2,000.00. While
the father or mother would in such event be exempt from
the duty of filing a bond, and securing judicial appointment,
still the parent's authority over the estate of the ward as a
legal-guardian would not extend to acts of encumbrance or
disposition, as distinguished from acts of management or
administration. The distinction between one and the other
kind of power is too basic in our law to be ignored. Thus,
under Article 1877 of the Civil Code of the Philippines, an
agency in general terms does not include power to
encumber or dispose of the property of the principal; and
the Code explicitly requires a special power or authority for
the agent "to loan or borrow money, unless the latter act be
urgent or indispensable for the preservation of the thing
under administration" (Art. 1878 no. 7). Similarly, special
powers are required to required to effect novations, to waive
any obligation gratuitously or obligate the principal as a
guarantor or surety (Do., nos. 2, 4 and 11). By analogy,
since the law merely constitutes the parent as legal
administrator of the child's property (which is a general
power), the parent requires special authority for the acts
above specified, and this authority can be given only by a
court. This restricted interpretation of the parent's authority
becomes all the more necessary where as in the case
before us, there is no bond to guarantee the ward against
eventual losses.

Appellants seek to bolster their petition by invoking the

parental power (patria potestas) under the Civil Code of
1889, which they claim to have been revived by the Civil
Code of the Philippines (Rep. Act 386). The appeal profits
them nothing. For the new Civil Code has not effected a
restitutio in integrum of the Spanish patria potestas; the
revival has been only in part. And, significantly, the Civil
Code now in force did not reenact Article 164 of the Civil
Code of 1889, that prohibited the alienation by the parents
of the real property owned by the child without court
authority and led the commentators and interpreters of said
Code to infer that the parents could by themselves alienate
the child's movable property. The omission of any
equivalent precept in the Civil Code now in force proves the
absence of any authority in the parents to carry out now
acts of disposition or alienation of the child's goods without
court approval, as contended by the appellee and the court
below.

Wherefore, the decision appealed from is affirmed. Costs

against appellants Nario. So ordered.

Concepcion, C.J., Dizon, Makalintal, Bengzon, J.P., Zaldivar,

Sanchez and Castro, JJ., concur.
Regala, J., took no part.

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